Largest Impact Investment Fund Ever, $2B Rise Fund Is All About ‘Quantifiable Social Goods’

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Millennials are two times more likely to buy a product from a company that has a purpose, and three times more likely to work for a company that has a purpose, says Bill McGlashan, founder and CEO of the Rise Fund.

The Rise Fund was launched in 2017 by private-equity giant TPG, and grabbed attention for the sheer scale of its assets — $2 billion — and the names of global billionaires and institutional investors that have made it the largest impact investment fund to date, according to a report in ImpactAlpha.

Rise Fund investors include Bono, Jeff Skoll, Pierre Omidyar, Richard Branson, Lynne Benioff, Reid Hoffman, Laurene Powell Jobs, Mellody Hobson, the president of Ariel Investment, and Mo Ibrahim, the mobile telecom pioneer in Africa.

One of the Rise Fund deals is with Dodla Dairy, a huge milk producer with 280,000 small stakeholder farmers in Southern India that collectively make up the fourth-largest dairy business in the country.

“It’s a great performing company,” McGlashan said. “This is a unique company in that they are not industrial in the way they’re architected … (Farmers have) in some cases, a cow, or maybe two cows. The big producers will be three or four cows. About 70 percent of the world’s poor are small stakeholder farmers. It turns out that if you create reliable payment to small stakeholder farmers, they will improve yield and earnings by 50 percent on average.”

Another Rise Fund deal is C3IoT owned by Tom Siebel, founder of Siebel systems.

“(Siebel) started delivering solutions to utilities,” McGlashan said. “There wasn’t enough (impact) data to pass muster. So it was originally in TPG Growth. We then did a follow-on investment and we now have about a $150 million investment into this company, which is growing about 100 percent a year. It’s extraordinary.”

So what drives decisions at the largest impact investment fund ever?

“We think we can take this beast called capitalism and help to direct it in a way that is productive. Because there is no chance we get to that just world with government money. There’s no chance,” McGlashan told Impact Alpha interviewer David Bank. “If you look at the dysfunction in Washington, we all know the answer there. So it has to be all of us coming together, and it has to be done in a way that’s scalable and sustainable.”

That “impact multiple of money, or IMM, can be delivered in increased income for smallholder farmers, reduced greenhouse gas emissions, lower costs through diabetes prevention, or other quantifiable social goods,” McGlashan said … “What we invest in is the growth of the business.”

Here’s an excerpt from the Impact Alpha interview.

McGlashan: We like building things. That’s very different than a traditional buyout fund. If we have to buy something to build it, that’s fine. If incubating makes sense, that’s fine. If partnering with an entrepreneur and being a minority makes sense, we’ll do that as well.

There’s no need to compromise on returns because you’re delivering impact. The sun shines on the good and the evil. An impact company is not different than the other companies …

ImpactAlpha: You’ve had lots of eclectic experiences. How did you come, personally, to the impact part?

McGlashan: When I was a child, we moved to Israel as a family and spent time in India. I became aware very early on that the world is not Palo Alto, California, where I was raised. One of the reasons my wife and I chose to move our family to India, to Mumbai – and the kids went to an Indian school – was in part because we were raising them in lovely Mill Valley. And it turns out the world is not Mill Valley, California. And when you arrive in Mumbai and it’s 96 degrees and humid, you really realize it’s not Mill Valley. And if you’re my son, you’re quite upset about it.

I grew up with a perspective that it’s a big world, as a global citizen. In college, I started an NGO, a nonprofit, the World Service Project. I spent time in Africa, and Costa Rica and all these places working on what I thought was going to be a very important platform in development. I came the conclusion very quickly that the numbers were against us.

Africa alone needs 15 million jobs a year just to keep up with the demographics of that continent. So 15 million this year, and next year 15 million. You can look at Syria as an example of how the Europeans have woken up to this. If we don’t get ahead of this and create opportunity and justice in these environments, where do you think they’re going? They’re going north, they’re going to Europe. The Europeans are launching a “Marshall Plan” for Africa for exactly that reason.

I came to the conclusion that it was through commerce and the sustainable, scalable nature of business that we could really address these issues…

… Every investment has impact. Let’s be clear. Every investment we all make has impact. The question is, is it good impact? Is it a negative impact? Or is it no-impact?

It raises an ethical question. There are $2.5 trillion sitting on the sidelines, in bank accounts, just sitting there. It creates an imperative to do something with that. Let’s go out and have a positive societal impact. That’s capital that can be invested against great purpose and great ends. It’s the most scalable sustainable way to drive change that can happen in a time frame that matters to all of us.

ImpactAlpha: You’ve been doing this for a dozen years or so with TPG Growth. And then a couple years ago, you announced TPG Rise and came out of the gates with people like Bono and all kinds of boldface-name, Silicon Valley billionaires. What were they looking for?

McGlashan: My co-founders in this are Bono and Jeff Skoll. We started to talk about the idea: “What if we could do this at institutional scale? What if we could attract that $10 trillion to invest in impact?” The key for us was: let’s start with the largest growth equity firm in the world, which is TPG Growth. Within the largest private-equity firm in the world, which is TPG. And let’s pull together people that are key influencers in the impact world. Laurene Powell Jobs runs the Emerson Collective, 400 people focused on education and environmental sustainability. Richard Branson is deeply involved in renewables. Mo Ibrahim is all about governance and impact in Africa.

ImpactAlpha: A significant majority of the investment came from pensions, sovereign, university endowments, correct? They wouldn’t call themselves impact investors.

McGlashan: In fact for most of those, this is the first impact investment they’ve ever done. That’s really important, because these are fiduciary funds whose priority is to invest for widows and orphans and retirees. They have to deliver, first and foremost, a return. The whole exercise of convincing them that we can deliver impact and return, and that there was no conflict, is a breakthrough idea. Historically there has been a perception that impact funds deliver lesser returns. There’s been a notion of compromising, a tradeoff.

Read more at Impact Alpha.

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Bill McGlashan and Eric Wahlforss speak at The Web Summit Day 3, RDS, Dublin, Ireland. Photo: WENN.com